Business Beyond the Reef

Americans lose sight of the fact that they are not the only ones who experience problems in trade with China. Yes, there have been articles about how Africans are getting suspicious of how Chinese firms operate in their countries, but we often ignore the old-fashioned trade disputes with China that mount up around the world.

The World Trade organization lists 23 cases that have been brought to Geneva against China. True, the United States has initiated a dozen of those, but we are not alone in our frustration with China’s trade practices. The European Union has filed suit against China five times. Mexico has launched three cases against China. Canada has brought two more. And even Guatemala has gone to Geneva about Chinese agricultural subsidies.

The European Union is stepping it up a notch, apparently furious about lack of equal access to Chinese government procurement markets. The EU’s trade commissioner (Brussels’ chief trade negotiator) Karel de Gucht gave an interview Monday in which he expressed more than just irritation at EU companies being cut out of Chinese government procurements.

My colleague, internal market commissioner Michel Barnier, and I are preparing a draft law on public markets so that we can respond if the Chinese continue to deny European companies access to certain segments of the market.
- Karel de Gucht

The draft should be ready for publication in March and is intended to give Brussels the ability to close off equivalent parts of EU procurements to competition from Chinese companies. Kind of like the old “mirror image” proposals in Canada and the United States for trade laws directed at Japanese competition. (Canada actually did it, slowing processing of Japanese vehicles at Canadian ports to take just as long as clearance of Canadian-origin vehicles in Japan.) De Gucht criticized China for “nationalist commercial practices“, “massive subsidies” and “monopolistic access to raw materials“. Sounds almost like a Republican primary debate.

All of this makes it very difficult to do business there.
- Karel de Gucht

Many years ago in Germany, there was a cartoon that I taped to my office door at the American Embassy (it was in Bonn way back then). The cartoon showed a bookstore window in which three “best sellers” were displayed in order of page length. The smallest was Tolstoy’s “War and Peace” and next came the King James version of the Bible. The biggest by far, however, taking up most of the shop window, was the European Union rules on the sale of chocolate bonbons.

I laughed out loud when I saw the same point in a list that summed up Europe’s current problems:

Pythagorean theorem: 24 words
Lord’s prayer: 66 words
Archimedes’ Principle: 67 words
Ten Commandments: 179 words
Gettysburg address: 286 words
US Declaration of Independence: 1,300 words
US Constitution with all 27 Amendments: 7,818 words
EU regulations on the sale of cabbage: 26,911 words

 

I was pleased to see Peter Rashish’s op-ed in the Wall Street Journal last Friday, in which he pushed the idea of a free trade agreement between the United States and the European Union. It is a venerable idea that has been mentioned off and on for the past sixty years. Perhaps its time has finally come.

I was a U.S. delegate in the Trans-Atlantic Business Dialog in the late 1990s (and headed up the Commerce Department’s European Policy Division even earlier) and often talked to folks about a US-EU FTA. The instant objection was always that such a negotiation and agreement would undermine the World Trade Organization and whatever multilateral trade talks were going on at the time. Insert the Tokyo Round, the Uruguay Round – take your pick. Rashish says the present objection is the same: the fear that a trans-Atlantic FTA might derail the Doha Round. Time to wake up, folks! The Doha Round is already derailed and it is time to save what we can from the wreckage.

According to a report by the Brussels-based European Center for International Political Economy, a transatlantic zero-tariffs initiative would increase combined U.S.-EU GDP by $180 billion within five years. That’s more added growth than either would receive from the completion of the Doha Round of multilateral trade talks.

Rashish makes the worthwhile point that duty-free trade across the Atlantic will greatly strengthen the global competitiveness of American and European manufacturers who now routinely have to pay customs duties on inputs that move back and forth across the “pond”. At a stroke, a non-competitive cost can be removed, giving a much-needed jolt to the U.S. and European economies. That also means a jobs boost on both sides of the Atlantic. And, combined with NAFTA, a trans-Atlantic FTA would create one huge duty-free market.

I applaud the Obama Administration’s determination to forge a broader Trans-Pacific Partnership, but let’s not forget the potential of the Atlantic while we are at it.

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Your humble scribe was quoted in last Friday’s Pacific Business News, talking about how small companies often get more interested in exporting during down economies. They even put my picture in the print version.